WH Smith hikes dividend as profit rises

Newspaper, books and stationery retailer WH Smith posted a three per cent rise in first-half profit and hiked its dividend as higher profit margins offset lower sales in a tough trading environment.

The group, which trades from over 570 high street stores and more than 500 outlets at airports, train stations, hospitals and motorway service stations, said on Thursday it made a pretax profit of £64m in the six months to 28 February.

"Looking forward, we expect the economic environment to remain challenging and we have planned accordingly," it said, echoing a string of British retailers which have warned of a tough outlook as shoppers grapple with rising prices, government spending cuts and a possible increase in interest rates.

Sales at stores open at least a year fell five per cent, with a three per cent decline at its travel division exacerbated by a six per cent drop at high street shops.

Gross profit margins, however, were up 170 basis points, following a long-term trend in which the group has focused on more profitable products, better sourcing and better control of markdowns.